The Reserve Bank of India on Thursday issued revised directions necessitating prior approval for acquisition of shares or voting rights in private sector banks.
As per the revised directions, a person intending to acquire shares, compulsorily convertible debentures/bonds, voting rights, convert optionally convertible debentures/bonds of 5% or more in a private sector bank will have to apply to the RBI for obtaining prior approval.
The central bank pointed out that an existing major shareholder, who already has the approval of the RBI to have a major shareholding in a bank, will not be required to obtain prior approval for fresh incremental acquisition of shares or voting rights of the concerned bank if the proposed aggregate holding is up to 10%.
However, the major shareholder will have to furnish details of the source of funds for such incremental acquisition and obtain ‘no objection’ from the bank concerned before such incremental acquisition, the RBI said.
If the fresh incremental acquisition is likely to result in enhancing the aggregate shareholding of the existing major shareholder in the bank beyond 10%, the major shareholder will have to obtain a fresh prior approval from the RBI for the proposed incremental shareholding.
Major shareholders of the bank would also have to give an annual declaration to the concerned bank on their ‘fit and proper’ status. If in the bank’s assessment, any major shareholder is not ‘fit and proper’, it will have to immediately furnish the requisite information to the RBI.